PPL Plaza in Allentown scheduled to be unloaded at sheriff's sale in March

AMY HERZOG / THE MORNING CALL FILE PHOTO

PPL Plaza in downtown Allentown was purchased for $90 million in 2006 by a New York investment group, but the group still owes $69.5 million as it goes to foreclosure.

PPL Plaza in downtown Allentown was purchased for $90 million in 2006 by a New York investment group, but the group still owes $69.5 million as it goes to foreclosure. (AMY HERZOG / THE MORNING CALL FILE PHOTO)

The latest chapter in the saga of PPL Plaza in downtown Allentown will be written inside Room 131 of the Lehigh County Courthouse at 10 a.m. March 22.

That’s the setting for the scheduled sheriff’s sale of the eight-story office building at 835 W. Hamilton St. — a crucial property in downtown Allentown that was once the headquarters of Talen Energy Corp. and has been mired in foreclosure proceedings since May 2017.

While it’s been known since July that PPL Plaza was headed for the auction block, the date and time weren’t released until a filing recorded Monday morning in Lehigh County.

The 90-page document directs the sheriff to “levy upon and sell” the property to satisfy the judgment against The Plaza at 835 W. Hamilton Street LP, an investment group created by New York City real estate investor Joshua Safrin that defaulted on the property’s mortgage in December 2016.

According to the filing, the investment group owes nearly $69.5 million, which doesn’t include interest that started accruing May 1.

In addition to PPL Plaza, the sheriff also is directed to sell the lot behind the structure at 26 N. Lumber St., the parking garage at 940 W. Linden St. and all associated personal property related to the real estate, including furniture, furnishings and fixtures, at the public auction.

Attorneys for PPL Plaza’s owner did not immediately respond to requests seeking comment.

Local officials have been waiting for the foreclosure process to wrap up, after which they believe PPL Plaza will have a bright future in the city’s revitalized downtown.

The plaza’s owners, meanwhile, believe the building’s predicament is the result of the city’s Neighborhood Improvement Zone, the state law created in 2009 that confers generous state and local tax incentives on commercial developers. The owners argue the buildings rising downtown with the benefit of tax subsidies have rendered PPL Plaza, which was custom built for PPL Energy Supply in 2003, essentially valueless and unable to compete in rent pricing.

Attorneys for PPL Plaza’s owner are taking it one step further in an ongoing court case in which they are requesting more than $10 million. Citing Pennsylvania’s eminent domain code, they argue the building’s exclusion from subsidized rents “constitute[s] a de facto taking of the property for which just compensation must be paid.”

Attorneys for the Allentown Neighborhood Improvement Zone Development Authority, meanwhile, point out the Plaza owner paid more than $90 million for the building and parking garage in November 2006, near the “very height of the United States’ prerecession real estate bubble,” and used a financing package that included just $13 million of its own money.

NIZ proponents also say the tax subsidies are available to the Plaza if the property is redeveloped or built out for a new tenant — something that will have to wait a few months until a new owner takes over.

What also remains unclear is how much the property will fetch March 22.

The most recent appraisal pegs the building’s value at just $12.8 million, down from a previous low of $22.4 million, according to information from Trepp LLC, a New York City firm that monitors loans that are included in commercial mortgage-backed securities.

Data received by Trepp pegs the building’s occupancy rate at just 10 percent, down from 90 percent in April — the last month that primary tenant, Talen, resided there before moving into a two-floor space in Tower 6, at Sixth and Hamilton streets, which is in the NIZ.

Without Talen, the roughly 245,000-square-foot PPL Plaza has only a few tenants: PPL Gold Credit Union, a restaurant and a BB&T bank branch on the first floor, along with some PPL Electric Utilities employees on the third floor.

The property’s declining value was clear in an offer from PPL Corp. this year.

PPL, which has its headquarters next door and leases parking spaces in the Plaza-owned garage, in February offered $10 million to buy the property — $31 million less than an offer the company made in January 2015.

PPL Electric Utilities spokesman Joe Nixon declined to comment Monday on whether the company is interested in bidding at the March auction.

As for the loan, the one the Plaza owners defaulted on, Wells Fargo sold its interests in the mortgage last month to Somera Road, a New York commercial real estate investment firm. Experts told The Morning Call that transactions like that are a typical way to get a foreclosure off the bank’s books, with Wells Fargo selling the debt to Somera Road and taking a write-off for the difference.

According to data received by Trepp, the bank wrote off a loss of nearly $51.1 million on the roughly $64.8 million debt, meaning Somera Road paid in the ballpark of $13.7 million to acquire Wells Fargo’s interests in the mortgage.

Time will tell whether Somera Road makes its money back. The firm did not return a call seeking comment Monday.